Correlation Between KG Eco and KCI

Can any of the company-specific risk be diversified away by investing in both KG Eco and KCI at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining KG Eco and KCI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KG Eco Technology and KCI Limited, you can compare the effects of market volatilities on KG Eco and KCI and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in KG Eco with a short position of KCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of KG Eco and KCI.

Diversification Opportunities for KG Eco and KCI

-0.16

Correlation Coefficient

KG Eco  KCI

Good diversification

The 3 months correlation between 151860 and KCI is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding KG Eco Technology and KCI Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KCI Limited and KG Eco is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on KG Eco Technology are associated (or correlated) with KCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KCI Limited has no effect on the direction of KG Eco i.e., KG Eco and KCI go up and down completely randomly.

Pair Corralation between KG Eco and KCI

Assuming the 90 days trading horizon KG Eco Technology is expected to generate 1.9 times more return on investment than KCI. However, KG Eco is 1.9 times more volatile than KCI Limited. It trades about 0.06 of its potential returns per unit of risk. KCI Limited is currently generating about -0.02 per unit of risk. If you would invest  482,915  in KG Eco Technology on December 2, 2024 and sell it today you would earn a total of  39,085  from holding KG Eco Technology or generate 8.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

KG Eco Technology  vs.  KCI Limited

KG Eco Technology

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KG Eco Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KG Eco may actually be approaching a critical reversion point that can send shares even higher in April 2025.

KCI Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days KCI Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KG Eco and KCI

The main advantage of trading using opposite KG Eco and KCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KG Eco position performs unexpectedly, KCI can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in KCI will offset losses from the drop in KCI's long position.

The idea behind KG Eco Technology and KCI Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.